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Comment by bende511 | Hacker News Reader

If I go to open a restaurant and I can convince a bank to lend me capital to start the business, and then it fails, I can see an argument for why they shouldnt lend me money to open a second restaurant, at least not right away. But why should I be penalized in personal life for a business failing. Should the bank get to take my house if my restaurant fails? Should I be prevented from getting a credit card?

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Where is the money coming from? And who should pay the bill you have left, when you fail? It will not disappear, and for the health of the system it can't disappear, so where is it going?

The party lending the money is knowingly taking the risk, and they get compensated for that risk by charging an interest rate that both sides agree to. There is nothing inherently nefarious about business loans. Some loans work out, others don't, and a competent lender will usually come out ahead in the long run.

well, thats the risk the bank takes when they lend my business the money, that I might not be able to pay it all back. they eat the loss, minus whatever they can recover from assets left over. and I get a mark that says you should think twice before lending me money for a restaurant again. but my life isnt ruined. i get to keep my house, i can still participate in financial society. the alternative is, as someone else pointed out, only those with lots of resources can afford to try to create new businesses. the US policy is that its worth it to have a more lenient bankruptcy process, with more bankruptcies that are less ruinous, since it leads to more risk taking (ie new business formation).

In Germany, your life is not ruined if you go bankrupt and have to pay for the fail you created. Society still gives you shelter, food, healthcare, even if you have lost your luxury. So there is no reason to make wasting resources and harming society simple.

Germany has limited companies - it's what GmbH's and AG's are for.

I'm not aware of any jurisdiction where "wasting resources and harming society" by having a company with limited liability go bankrupt isn't fairly simple.

Germany, like some other companies in Europe has fairly "high" requirements of share capital, but it's still only 25k Euro.

"Fairly high"?

In the UK it's £1. 25k Euros is ridiculously high!

well, its not harming society, its harming the lender. we obviously want to have protections against people taking advantage, but ultimately its up to the lender to make sure that the borrower has a realistic plan to pay back the loan, at least within whatever risk parameters they are willing to accept. In the end, its a tradeoff, the US has higher new business formation, especially from less well-off members of society, but more of those businesses fail.

When you harm the lender, you raise the rates and fees they charge their non-malfeasant customers. This benefits the wrongdoer while harming society.

Or you incentivice the lender to do better due diligence, and you weed out the less competent lenders?

Maybe it's a bit of both

I could not possibly disagree. But in a world with fewer lenders who have more rigorous qualification practices, are we paying lower rates? Kinda seems like no but we are now in the land of fourth order effects so who is to say.

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